Contents2 Executive summary

3 Double digit growth for UK again

9 River Cruising

10 Europeans buy more cruises

11 Cruising out of a crisis – the global picture

� An 18% increase of cruise bednights booked by UK passengers who choose to cruise for longer in 2008

� An 11% increase meant the third successive year of double digit growth for the UK market, bringingit to the brink of 1.5m cruise passengers

� 110,000 of the 140,000 extra UK passengers were for cruises out of UK ports

� Four out of every ten cruises booked started in a UK port – a share expected to increase in 2010 with thearrival of three new ships based in Southampton and one summer deployment becoming year-round

� One in every 12 package holidays booked in the UK is now a cruise; it was only one in 26 in 1999

� UK-booked cruise per diem prices fell more than 1% in 2008. More than a third of all cruises cost less than£1,000 and prices are falling again in 2009

� The Mediterranean remains the favourite cruise destination for the British but Northern/Western Europe iscatching up fast and overtook the Caribbean to be second favourite in 2008

� A record number of cruise lines, ships and passengers visited UK ports in 2008 and more overseaspassengers embarked on cruises from those ports than ever before

� Global cruise sales estimated at 17m for 2008 – a 4% increase

� A small drop in cruise passengers in the top-producing market – North America- is offset by a10% increase in European passengers which (including the UK) approached 4.5m in 2008

� European cruise industry now producing similar economic benefits for Europe as the North American cruiseindustry is contributing to the US economy

� 39 new ships on order through to 2012, including ten arriving in 2009

Executive summaryGlobal Cruise Market 2008

Source: UK Cruise Market 2008 – compiled for the Passenger Shipping Association and European Cruise Council by IRN, UK Cruise Survey (also IRN Research)

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3

Double digit growthfor UK again

For the third year in succession, theUK cruise market achieved doubledigit growth in 2008 when an 11%increase took passenger numbers tonearly 1.5m.

As the average length of cruise takenalso increased - from 9.7 to 10.4 nights– there was an even greater growth incruise bednights booked: 18%.

The market size has doubled in justnine years but perhaps the mostsignificant development during thatperiod is that this growth has come ata time when foreign package holidaysales in the UK have dropped by over2 million to less than 18m.

As a result, the equivalent of one inevery 12 foreign packages boughtby UK holidaymakers is now a cruisecompared to just one in 26 as recentlyas 1999.

Although cruise sales percentagegrowth is expected to be in the lowsingle figures in 2009, another declinein foreign package holiday sales is

inevitable following capacity cutbacksby the two major players: TUI andThomas Cook. As a result, cruising willagain increase its share of this sector.

Cruising has also increased its share ofthe overall foreign holiday market bymore than 50% to 3.3%. Much of thisgrowth has come in the three years to2008 when overall foreign holidaysincreased by less than 3% while cruisesales grew 38%.

Almost all passengers (83% in 2008)continue to book their cruises through

a travel agent even though in difficulttrading conditions, cruise companiesmarket more strongly to their pastpassengers.

As a result, the share of repeatpassengers grew sharply to 68% in2008 – the highest since 2000.

Since past passengers tend to be olderthan first-timers, this meant a slightincrease in the average age ofpassengers in 2008 – up from 53.2 to53.8. The age of flycruise passengersstayed exactly the same at 52.4.

1600

1400

1200

1000

800

600

400

200

01999 2000 2001 2002 2003 2004 2005 2006 2007 2008

GROWTH IN OCEAN CRUISE HOLIDAYSPAX 000s (1999-2008)

UK CRUISE MARKET, % SHAREBED NIGHTS BY DESTINATION, 2008

● MEDITERRANEAN 42%● NORTHERN EUROPE 16%● ATLANTIC ISLANDS 8%● CARIBBEAN 15%● OTHER 19%

In fact, those average ages havechanged remarkably little over thepast decade with 1999 averages of53.8 (52.3 flycruise) almost identical tothe 2008 figures. This is because thefrequency with which past passengersare cruising is increasing at a similarrate to the growth in families cruisingwhich is introducing more youngerpassengers to the mix.

More passengers are also choosing tocruise out of UK ports with a 23%increase in 2008 compared with just a4% rise in flycruise passengers. 110,000of the extra 140,000 UK passengerswere on UK-UK port cruises.

This was a major factor in theincrease in average cruise durationsand it also means that four in everyten cruise passengers now take theno-fly cruise route compared withjust two in ten in 1999.

While airport security hassles may beplaying a part, this dramatic shift ismainly due to the series of new shipsintroduced to UK-UK cruising by UK-based brands like P&O Cruises, CunardLine and Fred. Olsen Cruise Lines.

Another major factor has been the UKhomeporting of ships operated byEuropean or US-based brands like MSC

or RCI (year-round from 2010), PrincessCruises and Norwegian Cruise Line(NCL) but targeted at UK passengers.

These US brands were joined in theUK by Carnival Cruise Lines in 2008and Celebrity Cruises will follow with aUK market-designated ship in 2010 toensure this trend continues, especiallyas P&O Cruises (Azura) and CunardLine (Queen Elizabeth) are alsolaunching new ships.

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UK cruise passengers chooseUK ports

Norway, Baltic and Western Europewere the main beneficiaries of both theboom in UK cruise passenger numbersin 2008 and also of the growingenthusiasm to cruise from UK ports.

Overall, the region attracted 265,000UK passengers – a 24% increase on2007 which meant it overtook theCaribbean into second place (behindthe Mediterranean) among the UKcruise fans’ favourite destinations.

While six in ten still head south to theMediterranean or Atlantic Islands, twoin ten now cruise to the Baltic,Norway, around the UK or to thenear-Continent with nearly all (93%)embarking their cruise at a UK port.

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SOUTHERNERS HEAD NORTH, NORTHERNERS HEAD SOUTHIf you come from the South East of England, cruises to Northern Europe are your favourite while, for the Welsh, Scots and thoseliving in the North West of England, it is the Atlantic Islands all the way.One in five of UK cruise passengers come from the South East and, according to the UK Cruise Survey 2008 (carried out by IRNResearch for the PSA), they account for a third of the UK passengers to Northern Europe.The North West provides the second largest number of cruise passengers (13% of the 1.4m) and account for one in five of thosechoosing Atlantic Islands itineraries.At 9%, the Scots are the equal third largest UK market segment and, with the Welsh (6%), provide a quarter of the AtlanticIslands passengers.

% respondentsMediterranean Caribbean

NorthernEurope

AtlanticIslands Other

UK CruiseSurvey

Cruise linereturns 2008

South East 20 16 34 19 17 23 21South West 14 16 14 6 13 14 9North West 15 14 9 21 12 13 13East of England 8 8 8 11 12 9 4Yorkshire & Humberside 7 12 6 3 12 8 9Scotland 8 9 5 12 8 8 9West Midlands 9 8 5 8 3 7 8East Midlands 6 9 6 1 9 6 7Wales 4 2 6 12 5 5 6London 5 2 3 3 6 4 6North East 3 3 1 4 3 2 5Northern Ireland 0 2 0 0 2 1 2Total 100 100 100 100 100 100 100

CRUISE HOLIDAY TAKERS BY REGION OF RESIDENCE AND DESTINATION – 2008

Figures may not sum to total due to rounding. Weighted 1,128 responses. Source: IRN Research – UK Cruise Survey 2008.

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Their numbers, which have quadrupledsince 1999, are evenly split betweenthe Norwegian fjords, Baltic andWestern Europe and the regions areslowly closing on the Mediterraneanwhich enjoyed a 17% increase in UKcruise visitors in 2008 – as did theAtlantic Islands.

But, while most of the Mediterraneanincrease was down to more flycruises,the Atlantic Islands grew solely becauseof extra ex-UK port passengers.

Elsewhere, an increase in Queen Mary 2transatlantic crossings helped doublethe number of UK passengers on linevoyages – part of an overall trendwhich saw an increase in longhaulcruise passengers departing UKports set against a reduction inlonghaul flycruises.

The biggest fall was a halving ofthe number of passengers cruisingthe Red Sea, Arabian Gulf andIndian Ocean – a trend which may be

reversed in 2010 when RCI startscruising out of Dubai.

Alaska cruise numbers also fell –for the first time in five years andthis may continue in 2009 as cruisecompanies cut back on capacitythere due to a high passenger taxand onerous operating regulationsrecently introduced by the state.

UK CRUISE MARKET, % CRUISES7 DAYS OR UNDER

75

65

60

55

50

45

401999 2000 2001 2002 2003 2004 2005 2006 2007 2008

UK CRUISE MARKET, % SHAREBY BROAD DESTINATION, 2008

● MEDITERRANEAN 43%● CARIBBEAN 14%● NORTHERN EUROPE 18%● ATLANTIC ISLANDS 7%● OTHER 18%

BUT,WHILE MOST OF THE

MEDITERRANEAN INCREASE

WAS DOWN TO MORE

FLYCRUISES, THE ATLANTIC

ISLANDS GREW SOLELY

BECAUSE OF EXTRA EX-UK

PORT PASSENGERS.

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All cruise routes lead to UK

A record number of cruise ships calledat UK ports in 2008 when the totaltopped 100 (101) for the first time.This was ten more ships than in 2007and they also represented a recordnumber of cruise lines: 53.

Not surprisingly, this meant a recordnumber of visiting cruise passengers –8% up on 2007 at 396,000. This totalhas nearly doubled (+94%) since 2002.

The rising demand from UKpassengers for cruises departingUK ports ensured record numbers ofembarking passengers as well but the20% increase to 709,000 was alsopartly due to the number of overseaspassengers starting their cruises in UKports rising 5% to 132,000. This totalhas grown 71% since 2002.

Late bookings on the rise?

Although more than half the cruisessold in 2008 were still booked morethan six months in advance, there wasa small increase – from 24% to 26% –in those booked less than threemonths before departure.

This was still well below the 42% shareof late bookings taken as recently as in2001 when just 6% booked a year inadvance compared with 18% in 2008.But it suggested that the economicuncertainty was beginning to affectconsumer confidence – a trend whichappeared to be continuing in the earlymonths of 2009.

The UK Cruise Survey 2008 alsosuggested that destination playeda significant part in when cruiseswere booked.

THE BIGGEST FALLWAS A

HALVING OF THE NUMBER OF

PASSENGERS CRUISING THE RED

SEA, ARABIAN GULF AND

INDIAN OCEAN – A TREND

WHICH MAY BE REVERSED IN

2010WHEN RCI STARTS

CRUISING OUT OF DUBAI.

EMBARKATIONS (000’s)2002-2008

800

700

600

500

400

300

200

100

02002 2003 2004 2005 2006 2007 2008

● UK ● OVERSEAS

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Very few (4%) booked Atlantic Islandscruises within three months ofdeparture with a third booking thesemore than a year out. By contrast,nearly a quarter (23%) bookedMediterranean cruises no more thanthree months beforehand.

Prices go up aswell as down

The average price paid for a cruisebooked in the UK rose 6% to £1,409but this was because the British werebooking longer cruises and soboosting the UK cruise industry’srevenues by 17% to more than £2bn –double the 2003 total.

Average per diems actually droppedby £2 with per diems ranging from £80to more than more than £300 and 35%of cruises cost less than £1,000 withnearly 60% less than £1,500.

According to the UK Cruise Survey2008, price is one of the top threereasons for booking a particular cruisealong with destination and previousexperience with the cruise line.

The wide range of prices, which areeven more competitive in 2009, isinevitably broadening the market. Thisis reflected in the kind of newspaperscruise passengers are reading.

While the Daily Mail remains thefrontrunner – the choice of 30% of UKpassengers – a quarter of them (24%)now read the Daily Mirror, DailyExpress, Daily Star and the Sun.

More passengers (29%) also now readthe News of the World, Sunday Mirror,Sunday Express and Sunday Peoplethan the Sunday Times, SundayTelegraph and the Observer.

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Nile cruising on the rise

The number of UK Nile cruisepassengers leapt by 36% to more than39,000 in 2008, almost completing thisparticular river cruise destination’srecovery since 9/11 and then the IraqWar caused numbers to fall by nearlytwo-thirds from the 41,000 peak in2000 to less than 16,000 in 2003.

In fact, river cruises outside Europeshowed an overall 20% increase in UKpassengers in 2008 but this fell short ofoffsetting the sharp fall in the numberof European river cruises taken so thatthe overall UK river cruise passengertotal was nearly 9% down at 107,000.

The European drop was almost entirelydue to the failure (and withdrawal fromthe sector) of leading UK-based riverand ocean cruise operator, Travelscope.THE EUROPEAN DROP

WAS ALMOST ENTIRELY DUE

TO THE FAILURE (AND

WITHDRAWAL FROM

THE SECTOR) OF LEADING

UK-BASED RIVER AND

OCEAN CRUISE

OPERATOR, TRAVELSCOPE.

Passengers from the UK(000’s) Destination 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008*

Rhine/Moselle/tributaries 28.4 31.6 30.5 30.1 26.1 25.6 27.9 27.5 28.7 14.7

Danube 11.0 11.7 12.4 12.3 10.1 11.1 12.7 13.1 16.0 13.1

Russian 8.1 8.0 7.5 6.1 6.0 6.6 5.7 3.4 5.8 4.9

French (Rhone/Seine) 8.3 7.9 8.7 7.9 8.8 9.1 7.4 6.3 7.2 7.6

Italian (Po) 3.2 3.6 3.3 1.7 1.4 1.3 1.0 1.1 0 1.7

Elbe 1.1 2.1 2.2 1.1 3.2 5.4 4.7 2.5 3.8 2.8

Other European 4.2 7.8 9.5 12.5 5.5 13.9 15.3 15.3 12.4 9.1

Total European 64.4 72.6 74.0 71.6 61.3 73.0 74.7 69.2 73.9 54.0

Nile 31.4 41.0 34.5 25.5 15.8 22.7 31.8 30.1 29.0 39.4

Far East/China 1.3 3.0 7.3 18.2 11.0 13.1 6.4 8.1 8.2 6.7

Other non-European 1.3 1.2 0.8 1.3 2.0 2.2 5.7 3.5 7.0 7.0

Total non-European 34.0 45.2 42.6 45.0 28.9 38.0 43.9 41.7 44.2 53.1

Total 98.4 117.8 116.6 116.5 90.1 111.0 118.6 111.0 118.4 107.1

RIVER CRUISE HOLIDAYS, 1999 – 2008

Included in the above:- Abercrombie & Kent, Airedale Tours, Arena Travel, Bales Tours, British Airways Holidays, CaptainCook Cruises, Cruiseurope, Delta Queen, Der Travel Service, Europe Cruise Line, Greatdays Travel, Intourist Travel Ltd,Jules Verne, Kingdom Tours, Kuoni, Mundi Color Holidays, Noble Caledonia Ltd, Page &Moy, Peter Deilmann RiverCruises, Saga, Shearings, Somak Holidays, Swan Hellenic, Thomas Cook Holidays, Thomson Holidays, Titan Travel,Travel Renaissance, Travelscope Promotions, Travelsphere, Viking River Cruises, Wallace Arnold andWeir Associates.*2008 provisional Source: IRN Research – UK CRUISEMARKET 2008

Europeans buymore cruises

Every target the European cruiseindustry sets itself has had to berevised upwards as growth hasrepeatedly exceeded expectationsin recent years.

The UK remains the largestcontributor but its share is slowlyfalling with significant increases inGermany, Italy, Spain and Franceover the past five years.

In fact, Continental Europe has seena 73% increase in cruise passengers(to just under 3m) over that period andits share of overall European numbersis likely to grow again this year whenCosta, MSC and AIDA all introducenew ships.

EUROPEAN CRUISE INDUSTRY ONA PARWITH NORTH AMERICA

The European cruise industry iscatching up with its North Americancounterpart in terms of the economicbenefits to the countries it impacts.

In 2007, it generated €29bn in totaleconomic benefits for Europe whilethe North American industry’s impacton the US economy was $38bn (about€28bn). The European figure was upfrom less than €24bn in 2006 whenthe US figure was $36bn.

The European industry now alsosupports 285,000 jobs – up 26%from 2006.

Belying the economic situation, cruisepassengers also spent 25% moreashore at an average of €100 atembarkation ports and €55 at portsof call for a total of €1.5bn.

Italy, Germany and the UK are thetop three country beneficiaries withthe first two boosted by the incomefor their cruise shipbuilders Fincantieriand Mariotti(Italy) andMeyer Werft (Germany).

UK

Germany

Italy

Spain

France

1600

1400

1200

1000

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0

2003 2004 2005 2006 2007 2008

MAIN EUROPEAN CRUISE MARKETS2003-2008 PAX (000’s)

EUROPEAN SOURCE MARKET,% SHARE 2008

● UK 33%● GERMANY 21%● ITALY 15%● SPAIN 11%● FRANCE 7%

● SCANDANAVIA 3%● BENELUX 2%● SWITZERLAND 2%● AUSTRIA 1%● PORTUGAL 1%

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The Spanish market had been growingfast before the withdrawal of onebrand caused a slight dip in 2008.It is still likely to overcome thecountry’s severe economic problemswith an increase in cruise sales thisyear. This will be due to more capacityadded to the two leading brands –Pullmantur and Ibero Cruceros – bytheir new owners Royal CaribbeanCruises (RCC) and Carnival.

Germany showed the most growthin 2008 when a 19% growth broughtits total to 907,000 and, with the newTUI Cruises (also backed by RCC) brandlaunching, should top the million markthis year.

Even the previously cruise-waryFrench are joining the party, with a11% increase bringing the total above300,000 for the first time.

This is still only 7% of the totalEuropean market but the launch of aspecific French brand (CDF) by RCCmay be a first step in France starting topunch its weight in the European –and global – cruise market.

Cruising out of a crisis

The British led the way as the globalcruise industry continued to grow in2008 despite the credit crunch-inspired economic meltdown whichspread across the world during thesecond half of the year.

Provisional figures for the year suggest4% growth to about 17m oceancruises sold worldwide – and this wasdespite a 1.5% fall in the largestmarket, North America.

The 150,000 fewer cruises sold therewere, though, more than offset bythe extra 400,000 cruises sold toEuropeans and a third of these wereadditional UK passengers.

Although the economic situation hascreated some of the toughest marketconditions the travel industry has seenfor years, a combination of increasedcapacity, strong repeat business andtimely consumer recognition ofcruising’s value-for-money isexpected to ensure further globalgrowth in 2009.

IN 2008, A THIRD OF ALL

PASSENGERS CRUISED

MORE THAN ONCE A

YEAR COMPAREDWITH

JUST OVER A QUARTER

(28%) IN 2007.

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That downturn in North America isalso expected to be reversed.

The main reason for it was thecontinuation of the major cruisecompanies’ focus on Europe, adiversification policy which saw moreships deployed in that region at theexpense of destinations closer toNorth America.

But the economic situation hasprompted a couple of ships originallyscheduled for Europe to be redeployedto US ports for 2009/10 which will alsogive a new boost to North Americancruise sales.

Continued growth in Europe is,though, still assured with several newships – including two for Costa Cruisesand one apiece for MSC Cruises andAIDA Cruises – designated forEuropean markets in 2009.

A total of ten new oceangoing shipswill be launched this year, introducingup to 28,000 new berths onto themarket. They include the first of twoOasis-class ships for Royal CaribbeanInternational (RCI), which – at 225,000-ton and 5,400-passengers – will be thelargest-ever built. They will be based inPort Everglades, Florida for weeklyCaribbean cruises.

Including this year’s ships, 39 are beingbuilt for introduction through to 2012.This will guarantee continued growthin global cruising.

Cruise companies have currently calleda halt to more orders while they waitout the worst of the recession sogrowth is likely to slow between 2012-14 but it is expected to resume so thatthe target of 30m annual cruise sales isreached only a couple of years afterthe originally projected 2021.

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